Wednesday, December 10, 2008

This is the sort of headline that makes every free-market libertarian cringe: "World Bank's `Wrong Advice' on Free Trade Left Poor Countries' Silos Empty." Excerpts from the Bloomberg article:

About 40 million people joined the ranks of the undernourished this year, bringing the estimate of the world’s hungry to 963 million of its 6.8 billion people, the Rome-based United Nations Food and Agriculture Organization said yesterday. The growth didn’t come just from natural causes. A manmade recipe for famine included corrupt governments and companies that profited on misery. Another ingredient: The World Bank’s free- market policies, which over almost three decades brought poor nations like El Salvador into global grain markets, where prices surged.

“The World Bank made one basic blunder, which is to think that markets would solve problems of such severe circumstances,” said Jeffrey Sachs, director of the Earth Institute at Columbia University and a special adviser to UN Secretary-General Ban Ki- moon.

Created in 1944, the Washington-based World Bank Group spent much of its first 35 years dispensing low-interest loans, grants and development advice to poor countries with an eye toward promoting self-reliance. In 1980, the bank’s executives began attaching conditions to loans that required “structural adjustments” in the recipients’ national economies. The mandates were designed to have poor countries cut import tariffs, reduce government’s role in enterprises such as agriculture and promote cultivation of export crops to attract foreign currency.

The World Bank has “given consistently wrong advice,” said Jose Ramos-Horta, the president of East Timor in Asia and the 1996 Nobel Peace Prize winner. “It is their advice -- that buying externally is cheaper than producing -- that has resulted in this,” he said.

What should be clear to most educated readers is that the problems detailed in the article were not due to a failure of free markets or mistaken free market principles. They were due to the World Bank mandating the course of a country's development. That is not a free market principle, it is exactly the kind of thinking that has destroyed every command-and-control socialist economy. Good grief.